Supreme Court New South Wales Medium Neutral Citation: In the matter of Gavin Frederick Critchon Thomas and others and the Corporations Act 2001 [2013] NSWSC 2016 Hearing dates: 20 December 2013 Decision date: 20 December 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Order for appointment of a liquidator upon resignation of previous liquidator. Order for remaining jointly appointed liquidator and receiver of relevant entities to continue as sole liquidator or receiver. Notice of application to be provided to the Australian Securities and Investments Commission. Extension of time for lodgement of liquidator's accounts and statements in respect of relevant companies previously administered by jointly appointed liquidators. Catchwords: CORPORATIONS - winding up - liquidators - orders sought for appointment of liquidators and receivers upon the resignation of an appointed liquidator and receiver - whether Court has jurisdiction to make an order to fill the vacancies arising upon the resignation of a liquidator or receiver - whether where two or more persons appointed as liquidator, the functions or powers of the liquidators may be exercised by one alone - whether the period of lodgement of the liquidator's accounts and statements should be extended. Legislation Cited: - Corporations Act 2001 (Cth) ss 473, 473(1), 473(7), 479(3), 502, 530, 539, 1322, 1322(4)(d) - Supreme Court (Corporations) Rules 1999 (NSW) r 7.1 - Corporations Amendment (Insolvency) Act 2007 (Cth) Cases Cited: - Condon v Watson [2009] FCA 11; (2009) 174 FCR 314; (2009) 69 ACSR 350 - Re Free [2010] NSWSC 1079 - Re McGrath [2005] NSWSC 506; (2005) 54 ACSR 55 - Re Vouris [2004] NSWSC 384; (2004) 49 ACSR 543 - Re Wily [2003] NSWSC 1260; (2003) 49 ACSR 94 Category: Interlocutory applications Parties: Gavin Frederick Critchon Thomas (First Plaintiff) David Michael Morgan (Second Plaintiff) Mark Damien Roufeil (Third Plaintiff) Representation: Counsel: S Brown (Solicitor - Plaintiffs) Solicitors: Etienne Lawyers (Plaintiffs) File Number(s): 2013/366530 Judgment - ex tempore 1By originating process filed on 5 December 2013, the first plaintiff, Mr Gavin Thomas, seeks orders under s 473(7) of the Corporations Act 2001 (Cth) in respect of his retirement from practice in respect of certain appointments as liquidator by the Court, and an order that those appointments be filled by the second plaintiff, Mr David Morgan in some cases and the third plaintiff, Mr Mark Roufeil, in others. Mr Thomas initially also sought orders under s 502 of the Corporations Act but it is now apparent that he was appointed as liquidator of the relevant companies by the Court, and that those companies are not in a creditors voluntary winding up, so those orders are appropriately sought under s 473 of the Corporations Act and I will approach the matter on that basis. Mr Thomas also sought orders under s 1322(4)(d) of the Corporations Act that the period for lodgement of the liquidator's accounts and statements under s 539 of the Corporations Act be extended in respect of each of the companies so that Mr Thomas could lodge the relevant accounts on the date on which they would have been lodged, had he not resigned, and a corresponding change in the period in which Mr Morgan and Mr Roufeil, as applicable, had to lodge the form prescribed by s 539 of the Corporations Act. Finally, Mr Thomas sought to resign as receiver of certain trusts, which, as will emerge below, were appointments connected with his appointment as liquidators of the relevant companies. 2The application is supported by Mr Thomas' affidavit sworn 21 November 2013. Mr Thomas is 72 years old and will retire from practice on the date on which the Court makes the orders sought, although I will refer below to his intention to continue to assist a newly appointed liquidator in respect of some of the liquidations. He indicates he has not been able to complete the winding up of five companies to which he was appointed and that he wishes to resign those appointments and he proposes that Mr Morgan be appointed as liquidator of those companies. Mr Morgan is a registered liquidator and a partner in the firm of Clout & Associates. Mr Morgan gives evidence that he has been a registered official liquidator since May 2008 and his firm has sufficient staff to cater for the appointments. He consents to act as liquidator of the relevant companies and his consents indicate that he is not aware of any conflict of interest or duty that would make it improper for him to act as liquidator of those companies. Although his schedule of hourly rates was not annexed to the consents which were in evidence, that schedule of hourly rates has now been tendered and gives rise to no apparent difficulty. Mr Thomas expressed the view in his affidavit that: "In my opinion it is in the interests of creditors under these circumstances, that the control of the files in respect of the [administrations] be transferred to the staff of [Messrs Morgan and Roufeil]." 3Mr Thomas elaborated on the reason for the appointment of Mr Morgan in oral evidence and that evidence explained why, in my view, there is good reason to make such an appointment rather than, for example, to appoint a liquidator from the list maintained by the Registrar. Mr Thomas resides in Urunga, some 30 minutes south of Coffs Harbour and Mr Morgan practices in Coffs Harbour. Several appointments which Mr Thomas held as bankruptcy trustee have already been transferred to Mr Chubb, a partner in the same firm as Mr Morgan, and Mr Thomas has been assisting Mr Chubb and his staff for several months in respect of those appointments. It would, in practice, of course be expected that each of those persons will be assisted by staff of that firm in respect of the relevant liquidation. I do not regard the fact that two different individuals in the firm were appointed to the two different roles as reducing the logic of Mr Morgan's appointment, because Mr Thomas' existing relationship with that firm, and the geographical proximity of that firm to his place of residence, to which I have referred, will assist in facilitating the continued assistance to that firm and Mr Morgan which he proposes to provide. 4Mr Thomas' evidence is that he considers that recoveries for creditors remain possible in respect of the matters where he proposes Mr Morgan for appointment, and the Australian Securities and Investments Commission ("ASIC") has requested that one of those companies not be deregistered while regulatory action continues against one of its officers. 5Mr Thomas' evidence is that he is prepared to provide assistance to Mr Morgan in respect of these liquidations, as he has done in respect of the bankruptcy matters transferred to Mr Chubb, so his knowledge is not lost, and that the work involved would be charged at less than his present charge out rates. Obviously, it would be significantly more difficult, or impossible, for such assistance to be provided to a new liquidator appointed to those companies if that liquidator's officers were not located in the same geographical area as Mr Thomas. There seems to me to be a significant benefit of continuity and a likely saving to creditors from the appointment of Mr Morgan which warrants that appointment. 6The means for replacement of a liquidator, on his resignation, is well established. Section 473(7) of the Corporations Act provides that a vacancy in the office of a liquidator appointed by the Court must be filed by the Court. Rule 7.1 of the Supreme Court (Corporations) Rules 1999 (NSW) in turn provides that a liquidator appointed by the Court who wishes to resign must file with the Registrar and lodge with ASIC a memorandum of resignation and his or her resignation takes effect on filing and lodging that memorandum. In order to resign his office, Mr Thomas will need to adopt that course. However, the Court has power to replace a Court appointed liquidator, who is about to resign, prior to his or her resignation taking effect: Re Wily [2003] NSWSC 1260; (2003) 49 ACSR 94; Re McGrath [2005] NSWSC 506; (2005) 54 ACSR 55; Re Free [2010] NSWSC 1079. I propose to make an order to substantially the same effect of that made in Re Wily and Re McGrath, namely an order that any vacancy in the office of liquidator arising by reason of Mr Thomas' resignation as liquidator of the companies specified in Schedule 1 to Annexure A to his affidavit, be filled on the same date by the appointment of Mr Morgan to hold office as liquidator of each such company. That form of order should specify a particular date for Mr Thomas' resignation and for Mr Morgan to fill that position so that the question of resignation and replacement does not remain open indefinitely. 7Mr Thomas indicates that he also seeks to resign as the jointly appointed liquidator of two companies to which he was appointed by the Court as joint liquidator with Mr Roufeil and also to resign as the joint receiver of three associated trusts and proposes that Mr Roufeil would continue in the position of liquidator of those companies and receiver of those trusts respectively. He has given oral evidence that that appointment was made on ASIC's application and that efforts to recover property in respect of the relevant companies and the trusts from offshore are continuing. Mr Roufeil is a registered liquidator and a partner in the firm of Lawler Partners and, as I have noted, is already jointly appointed as liquidator of the companies and receiver of the trusts. Mr Thomas frankly acknowledged in oral evidence that a question might arise as to whether a second liquidator or receiver should be appointed, and that is a matter that properly ought to be considered in such an application. 8The mechanism for dealing with the position where a joint Court appointed liquidator resigns was considered in Condon v Watson [2009] FCA 11; (2009) 174 FCR 314; (2009) 69 ACSR 350 at [54]ff. Lindgren J there referred to the earlier decision in Re McGrath above, where Barrett J had contemplated that a new liquidator might need to be appointed, by reason of s 473(1) of the Corporations Act, where one joint liquidator resigned and the other remained in office. However, his Honour drew attention to s 530 of the Corporations Act, introduced by the Corporations Amendment (Insolvency) Act 2007 (Cth), which provides that, where two or more persons have been appointed as liquidators of a company, a function or power of a liquidator may be performed or exercised by any one of them, except so far as the order or resolution appointing them otherwise provides. There is no suggestion in this case that an order otherwise providing was made, although I will grant liberty to apply in case any difficulty arises in that regard. Lindgren J noted in Condon v Watson (at [62]) that the effect of s 530 was that, following the resignation of one of two liquidators appointed to a company, the other was entitled to perform the functions and exercise the powers vested in the liquidators in his or her own right. In that situation, it does not seem to me to be necessary to appoint a further liquidator on Mr Thomas' retirement from the two companies with which he is joint liquidator with Mr Roufeil, particularly where Mr Roufeil has held office for some time, and has not indicated, so far as the Court is aware, any concern as to continuing in that position as, in effect, a sole liquidator. I propose to make an order in the form made in Condon v Watson, which is to direct, under s 479(3) of the Corporations Act, that on Mr Thomas' retirement, Mr Roufeil be entitled to continue as liquidator of the relevant companies. 9I should add that it would have been preferable had ASIC been given notice of this application, where it had originally applied for appointment of the liquidators and receivers. However, it seems to me that that matter may readily be addressed by requiring Mr Thomas to give such notice to ASIC and reserving liberty to ASIC and any other interested person to apply should it seek to vary these orders. 10There remains the question of the appointment of Mr Thomas, with Mr Roufeil, as receiver of each of the Hereford Unit Trust, the Lyrebird Unit Trust and Lyrebird Unit Trust No 3, which was made by the Court in conjunction with their appointment as liquidators of the associated companies. The position as to resignation of a receiver was considered by Palmer J in Re Wily above at [9] and by Barrett J in Re Vouris [2004] NSWSC 384; (2004) 49 ACSR 543 at [20], where his Honour noted that the Court's jurisdiction was found, at that time, in Pt 29 r 5 of the Supreme Court Rules 1970 (NSW). His Honour noted that there was no express power for a receiver to resign but the Court had jurisdiction under that Part or its inherent jurisdiction to discharge a receiver and that a receiver could be discharged at its own request, by way of resignation, or, by extension, by way of retirement, and that the Court also had the power to appoint another receiver. The corresponding rule is now r 26.6 of the Uniform Civil Procedure Rules 2005 (NSW) which contains a similar power to discharge a receiver. I propose to make an order under that rule discharging Mr Thomas and confirming the continued appointment of Mr Roufeil as receiver of the relevant trusts. 11I noted above that Mr Thomas also sought orders under s 1322 of the Corporations Act which, broadly, would alter the time for lodgement of the liquidator's account and statements required by s 539 of the Corporations Act. I understand that application to reflect the approach adopted by Barrett J in Re Free, in the case of the replacement of a joint liquidator. His Honour there noted that, where the existing provisions would provide for the lodgement of the relevant accounts and statements at regular intervals, there was likely to be a waste of costs and no obvious advantage in changing the timing of such statements and accounts. His Honour noted that s 1322(4)(d) of the Act permitted such a course, where it would not involve substantial injustice and, indeed, might well involve efficiencies and savings for creditors. In my view, there is substantial force in that reasoning, in the present case, where a joint appointment of Mr Thomas and Mr Roufeil as liquidators will, in substance, be continued by Mr Roufeil remaining as liquidator of two of the companies. I would not, however, extend that reasoning to the position where one liquidator is replaced by another, as will occur in the case of several companies here, because there, there seems to me, to be considerable advantage in the statutory regime, which requires the retiring liquidator to prepare his or her accounts after retirement, and the new liquidator then to prepare separate accounts. I consider that the rationale for that to occur continues to be applicable notwithstanding that Mr Thomas anticipates continuing to assist Mr Morgan in respect of his appointment. I will therefore make orders under s 1322 of the Corporations Act, but only in respect of the companies as to which Mr Roufeil will continue as liquidator. I note that this course is consistent with that adopted in Re Free where Barrett J noted that no order under s 1322 had been sought in respect of the position where a new liquidator was being appointed, as distinct from the position where one of the joint liquidators was continuing. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 February 2014